Michael Saylor’s Bitcoin Strategy Has Hurt Crypto Market; Ripple CEO Brad Garlinghouse

TLDR

• Brad Garlinghouse criticized Strategy’s Bitcoin accumulation funding model.
• Garlinghouse said he remains bullish on Bitcoin despite criticizing Strategy.
• STRC recently traded about 25% below its $100 liquidation preference.
• STRC carries an 11.5% annual cumulative dividend.
• Strategy’s mNAV fell to 0.99 as Bitcoin traded below $60,000.

Ripple CEO Brad Garlinghouse criticized Strategy Chairman Michael Saylor’s Bitcoin accumulation model, saying the company’s use of preferred shares and other financing structures has not supported long-term value in the digital asset market.

Garlinghouse made the comments in a CNBC interview as Bitcoin traded below $60,000 and Strategy’s preferred shares remained under pressure. He said he remains bullish on Bitcoin, but argued that lasting value in digital assets should come from utility rather than financial engineering.

His remarks focused on Strategy’s capital-raising model, which has used preferred securities such as STRC to fund additional Bitcoin purchases. STRC carries an 11.5% annual cumulative dividend and was designed to trade near its $100 liquidation preference, but it recently traded about 25% below par.

Garlinghouse Criticizes Strategy’s Funding Model

Garlinghouse said financial engineering does not drive long-term value and added that the value of any digital asset should be tied to usefulness. He said Strategy’s approach has not focused on the factors that support durable crypto market growth.

The Ripple CEO pointed to STRC’s decline as evidence of weakness in Strategy’s approach. He described the preferred share’s trading level below par as a strong negative signal for a model that depends on continued investor demand for capital instruments linked to Bitcoin accumulation.

Strategy has issued several preferred securities over the past year to raise cash for Bitcoin purchases. These instruments created fixed dividend obligations while allowing the company to keep expanding its Bitcoin holdings during periods when its stock and preferred securities traded at favorable levels.

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That structure has come under pressure as Bitcoin declined and Strategy’s listed securities weakened. When preferred shares trade below par, issuing new shares becomes less attractive because the company may be unable to raise capital on terms that support its Bitcoin-per-share strategy.

STRC Falls Below Par as Bitcoin Drops

STRC recently fell to a record low, trading as much as 26% below its $100 liquidation preference before closing near $74.57. Strategy’s common stock also declined, closing around $82.31 after dropping to levels not seen since February 2024.

Bitcoin’s fall below $59,000 added pressure to Strategy’s balance sheet because the company holds a large BTC position acquired at higher average prices. Strategy’s website showed its market net asset value, or mNAV, at 0.99, meaning the company’s enterprise value had fallen below the market value of its Bitcoin holdings.

That level is below the roughly 1.22x threshold previously identified by management as the point where issuing MSTR to buy more Bitcoin remains accretive on a per-share basis. Below that level, other actions such as rebuilding cash reserves, buying back stock, or selling some Bitcoin may become more financially attractive than issuing common shares for more BTC.

CryptoQuant also said this week that Strategy should pause Bitcoin purchases and rebuild cash reserves. The firm said coverage for preferred dividend obligations had narrowed from more than seven years to about 14 months.

Strategy Faces Scrutiny Over Bitcoin Accumulation

The pressure on STRC and MSTR has increased debate over whether Strategy’s Bitcoin accumulation model can keep working during a prolonged drawdown. The company’s strategy relies partly on market demand for its equity and preferred instruments, which can weaken when Bitcoin prices fall and investor risk appetite declines.

Garlinghouse said his criticism was directed at the funding approach rather than Bitcoin itself. Ripple is closely associated with XRP, but Garlinghouse said he remains positive on Bitcoin while arguing that crypto markets should focus more on real-world use.

Strategy has continued to present its Bitcoin plan as a long-term capital allocation strategy. Saylor recently said volatility tests every capital structure and that Strategy remains focused on Bitcoin, disciplined capital allocation, credit quality, and long-term value creation.

The company’s position has drawn criticism from other market commentators as well. Bitcoin skeptic Peter Schiff has said Saylor promoted STRC to investors seeking reduced volatility while the preferred shares later fell more than Bitcoin over a recent period.

Strategy has not announced a change to its core Bitcoin strategy. However, the drop in STRC, the decline in MSTR, and the fall in mNAV have placed closer attention on the company’s cash reserves, dividend obligations, and ability to raise capital while Bitcoin trades below earlier highs.